Infosys Ltd, India’s second-biggest software exporter, reduced its sales growth forecast for the year ending March 31 as chief financial officer Rajiv Bansal resigned.
The company said revenue is likely to grow by 6.4 percent and 8.4 percent for the year, lowering its earlier guidance of 7.2 percent to 9.2 percent, it said in a statement.
Net income in the quarter through Sept. 30 still rose 9.7 percent from a year earlier, beating analysts estimates, as it added 82 clients in the three months.
Photo: AFP
While the Bangalore-based codewriter did not give a reason for the cut in growth forecast, India Nivesh Securities analyst Amar Mourya attributed it to the appreciation of the US dollar against major currencies.
Of the world’s 17 primary currencies tracked by Bloomberg, 14 weakened against the US dollar in the quarter.
Yesterday was Bansal’s last day as CFO. He is to be replaced by M.D. Ranganath, according to the statement.
“It is a cross-currency impact,” Mourya said. “They had to do it because everything is depreciating against the [US] dollar.”
Net income in the three months through Sept. 30 rose to 34 billion rupees (US$525 million) from 31 billion rupees a year earlier, beating the estimated 32.8 billion rupees in a Bloomberg survey.
Sales climbed 17 percent to 156.4 billion rupees in the quarter from 133.4 billion rupees a year ago, exceeding the 152.2 billion rupees estimate in the survey.
“While results in any one quarter are transitory snapshots of a long journey, we do see our focused execution along our strategy to produce encouraging results,” CEO Vishal Sikka said in the statement.
Focus on operational efficiencies and a hedging program to mitigate currency volatility resulted in higher operating margins despite higher variable payouts, Bansal said in the statement, without elaborating on why he quit. He told television channels he is seeking opportunities outside Infosys.
The total contract value of large deals signed during the quarter was US$983 million, the company said, maintaining its sales forecast for the year in constant currency terms at 10 percent to 12 percent. The board declared an interim dividend of 10 rupees a share.
Shares of Infosys dropped 3.8 percent to 1,122.90 rupees in Mumbai, after jumping as much as 4.5 percent earlier. The stock has rallied 21 percent since July 10, when it touched a nine-month low.
A lower sales forecast is the main reason for the selling pressure, said Sudip Bandyopadhyay, chief executive officer at Mumbai-based Destimoney Securities Pvt.
“Infosys had run up almost 10 percent in the past month, clearly indicating higher expectations that the investors had from the earnings,” he said. “After such a run-up, correction in the stock price was always a possibility unless there was something spectacular from the earnings.”
Infosys earnings come amid an industrywide slowdown that has challenged bigger rivals. Accenture PLC gave a muted guidance for the year ending August next year, while Infosys chief operating officer U.B. Pravin Rao said last month he saw pricing pressure in some sectors like insurance and energy.
Traditional software services are witnessing pressure because of slow growth in spending by clients, Nirmal Bang Equities analyst Girish Pai said in a Sept. 7 report.
The fiscal year starting April next year “could see the start of the value compression spiral in traditional services which we have been anticipating,” he said.
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